there is no real, valid, practical reason you should partition your hard drive like that, and you experienced exactly why you should just not go there. Multi partitions on the same hard drive waste disk space, slightly increase read/write time, and if your system partition is too small, cause problems like the one your having.
I did that one time a long time ago so my novice self could feel just a little bit more spiffy with the added techo-fluff in my geek conversational repitoir. "yeah blah blah I got a 9 gig with 5 partitions DUDE blah blah thats so COOL, huh" That was a foolish move. As game file sizes increased ( Diablo 1 on to Diablo 2 and its expansion), I found myself unable to install the game, even though I had enough room if I totaled up all the free space of all my patitions. There was not enough space in one of my single partitions. A file cannot span partitions. Partition Magic is a pipe dream and a gamble.
The only place multi-partition hard drives would be slightly useful is in the office on a server that is being used by a few people.
Also, dont forget that even though your drive is 120 GB, windows will set aside a certain ammount of space on EACH partition for their respective File Allocation Tables.